How to Trade · Phase 2 · Module T3
Technical analysis is a language for describing what price has done. This module teaches the vocabulary — what each tool shows, read as a record of the past, not a prediction of the future.
What this module covers
Before anything else
A chart is a record of what price has done. This module teaches how to read that record accurately. It does not teach what to do about any of it — those are different questions, and the line between them is the whole point.
Most chart-based content collapses this distinction without flagging it. A shape is identified, and then — without any acknowledged leap — what the shape "means" about future price is stated as if it follows automatically. It does not. A chart contains only what happened; the implication about what comes next is added by the person reading it, from their own analysis and tested experience. That implication is not in the chart.
This module stays on the description side of that line deliberately. The vocabulary defined here — swing highs, swing lows, trend, range — is used precisely in later modules that build stop-placement logic on top of it. That logic only works if the terms mean specific, agreed things, not whatever the reader infers. So this module establishes the terms as descriptions, cleanly, before anything is built on them.
Candlesticks
A candlestick represents a single time period — one minute, one hour, one day, whatever the chart's timeframe is set to. It captures exactly four prices: the first price of the period, the last price, the highest price reached at any point, and the lowest. Nothing else. Every candlestick, on every chart, on any gold instrument, is a summary of those four numbers and nothing more.
Bullish candle: close above open
The body of the candle spans the distance between open and close. The wicks — also called shadows — extend above and below the body to the high and low respectively. A candle with no upper wick means the high of the period was the same as whichever of open or close was higher; a candle with no lower wick means the low matched whichever was lower. Both are common and unremarkable.
Read with these four values in mind, a candle becomes a compressed summary of a period's activity: where it started, where it ended, and how far price travelled in both directions along the way.
Three shapes appear frequently enough to be worth naming, described here purely as what they record:
Wide bullish body
The close is well above the open, with wicks that are short relative to the body. Price advanced steadily from open to close, with limited retracement in either direction. The whole period moved in one direction.
Small body, long lower wick
Price fell significantly below the open during the period but recovered to close near or above the open. The long lower wick is the record of that excursion: lower prices were tested and not sustained through the close.
Small body, long upper wick
Price rose significantly above the open during the period but could not hold the advance, closing near or below the open. The long upper wick is the record of the attempt: higher prices were reached and not sustained through the close.
Each description above ends at what is observable: what the period's price action was, where it started and ended relative to the range. None of these shapes, on their own, carry a predictive claim. What a long lower wick means for the next candle is a separate question — one that depends on context, location, and an analytical framework that is not part of reading the candle itself.
Price-action structure
Individual candles record individual periods. Structure is what emerges when you read across a sequence of them — the recurring peaks and troughs that form when price advances, pauses, and reverses direction. Four terms describe that structure. All four are used precisely in later modules and are defined here with that precision in mind.
Swing High
A local price peak: a candle whose high is higher than the highs of the candles immediately preceding and following it. When price advances, reaches a high point, and then declines on both sides — that high point is the swing high. It marks where an upward move paused or reversed. A swing high can only be identified once price has moved lower on at least one candle on each side of the peak; it is confirmed from completed price action, not from the candle still forming.
Swing Low
A local price trough: a candle whose low is lower than the lows of the candles immediately preceding and following it. When price declines, reaches a low point, and then recovers on both sides — that low is the swing low. It marks where a downward move paused or reversed. Like a swing high, it is confirmed from completed price action once price has moved higher on at least one candle on each side.
Trend
A trend exists when swing highs and swing lows are consistently moving in the same direction across a sequence of completed swings. In an uptrend, each successive swing high is higher than the previous one, and each successive swing low is higher than the previous one — higher highs and higher lows. In a downtrend, each successive swing high is lower than the previous one, and each successive swing low is lower — lower highs and lower lows. The trend label is a description of the sequence that has already occurred. It makes no claim about whether the next swing will continue the pattern.
Range
A range exists when price oscillates between approximately consistent levels without making consecutive progress in either direction. Swing highs cluster near an established upper level; swing lows cluster near an established lower level. Neither higher highs nor lower lows are forming across the sequence. The range label, like the trend label, is a description of the swings already made — not a claim that the market will stay within those levels.
Uptrend — higher highs, higher lows
Each SH (swing high) is higher than the last. Each SL (swing low) is higher than the last. This is the uptrend sequence as a description of what has happened.
Range — consistent highs and lows
Swing highs cluster near the same level. Swing lows cluster near the same level. Neither is consistently progressing. This is the range sequence as a description.
Swing highs and swing lows are the skeleton of price action. They identify where the market has found interest in both directions, and they are the reference points that stop-placement logic is built from in the module that follows. The precision of that logic depends on these terms meaning exactly what is defined here — not a rough visual impression, but the specific structural fact: a confirmed peak or trough where price moved on both sides.
Volume
Volume records how much trading activity occurred during a period. On gold futures — GC and MGC — this is the actual number of contracts exchanged on the exchange during that candle's timeframe, and it is a precise figure derived from centralised exchange records. On spot XAU/USD, the figure shown as "volume" on most retail platforms is tick volume — the number of price updates streamed by the broker during the period — not a count of actual trades in the underlying market. There is no central exchange for spot, so there are no exchange-level volume records; tick volume is a proxy, and it behaves similarly to real volume in liquid sessions, but it is not the same thing.
Volume answers one question: how much activity accompanied this price move? A large price move on high volume means many contracts changed hands as the move developed — substantial market participation. The same price move on low volume means fewer contracts were involved — thin participation. Both are observable facts about the candle.
The word "confirms" appears often in volume analysis and is worth defining narrowly. In this module, "high-volume confirmation" means only that a specific price event — a breakout through a level, an advance off a low — was accompanied by above-average trading activity. That is the descriptive content of the statement. Whether above-average activity makes the move more likely to hold is a separate claim that goes beyond the observation. Used precisely, "confirms" means the activity level is consistent with what the price description says happened; it does not add a forward-looking claim about what happens next.
Thin-volume moves carry their own descriptive note: a level that breaks with very low activity behind it is a different event from one that breaks with heavy participation, because the number of participants willing to transact at the breakout price was itself limited. Both events are real; both are observable; neither observation tells you what price will do from there.
Spot XAU/USD vs. gold futures
If you trade spot XAU/USD, treat platform volume figures as directional indicators of relative activity, not as precise contract counts. If you trade GC or MGC, exchange-recorded volume is accurate and directly comparable period to period. The descriptive framework above applies to both — the difference is in the precision of the underlying data.
Carrying out of T3